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Week in Review | TOP STORIES -- Aug. 24-30

August 31, 2003|From Times Staff

Former WorldCom Chief Is Charged

Bernard J. Ebbers, who as head of WorldCom Inc. was a leading figure in the 1990s telecom gold rush, was charged with securities fraud in Oklahoma, marking the first criminal action to be brought against the former corporate titan.

Ebbers, 62, was named in a 15-count document alleging that he and five other employees engaged in an extensive accounting fraud that drove WorldCom into the biggest bankruptcy filing in U.S. history. The company also was named as a defendant.

The Oklahoma case brought cheers from some investors and corporate governance experts who have been aggravated that U.S. prosecutors haven't charged Ebbers with wrongdoing. The case reopened a battle between state and federal regulators over who should lead the crackdown on white-collar crime.

Ebbers' attorney, Reid Weingarten, said there was "a total lack of any evidence that Mr. Ebbers committed crimes."

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Two Bidders Remain for Vivendi's U.S. Assets

Liberty Media Corp. became the latest bidder to pull out of the auction for Vivendi Universal's entertainment assets.

Moving into the final stages of a marathon auction process, Vivendi's board said it decided to enter into further negotiations with the two remaining bidders: General Electric Co.'s NBC and a group headed by Vivendi Vice Chairman Edgar Bronfman Jr.

Viacom Inc., a group led by Marvin Davis, Metro-Goldwyn-Mayer Inc. and Comcast Corp. also had pulled out in recent weeks, balking at Vivendi's $14-billion asking price.

Top Vivendi executives said this month that they expected to reach a preliminary deal with one of the bidders by Labor Day. That's looking increasingly unlikely, however, as the French conglomerate grapples with two wildly different proposals.

Unlike NBC's offer, Bronfman's bid includes a huge cash component. The offers pose a stark choice for Vivendi: take the money now or postpone its exit from Hollywood for a potentially bigger payday down the line.

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Credit Lyonnais Indicted in Insurer Case

A federal grand jury in Los Angeles has issued a sealed criminal indictment of Credit Lyonnais, other businesses and individuals connected to the French bank's early-1990s acquisition of California's Executive Life Insurance Co., according to sources familiar with the matter.

U.S. prosecutors have told targets they would lodge fraud charges publicly as early as this week, sources said.

A Credit Lyonnais spokesman said the bank had no comment on the sealed indictment.

The case stems from state Insurance Commissioner John Garamendi's seizure of Executive Life in 1991 after he determined that junk bond losses left it insolvent. Prosecutors allege Credit Lyonnais hid its role in its 1993 purchase of Executive Life to evade regulations governing the ownership of insurers.

The bank may face regulatory penalties if found to have violated the law, Federal Reserve Chairman Alan Greenspan said.

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NYSE Discloses Big Pay for Chief Grasso

In its first disclosure of an executive's pay, the New York Stock Exchange said Chairman Richard Grasso would receive $139.5 million in accrued retirement and other benefits this year, plus a salary and bonus of at least $2.4 million.

The compensation package was made public when the NYSE announced it extended Grasso's contract through 2007.

The size of the package sparked protests, as did the unusual contract provision allowing Grasso, 57, to pocket a huge sum in retirement money years before he might actually retire.

Under the five-year contract, Grasso's deferred compensation, savings and retirement plan benefits were "restructured," the NYSE said, allowing him to withdraw the benefits this year. Grasso, who has worked for the NYSE for more than 30 years, was unavailable for comment.

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State Blamed for Workers' Comp Crisis

A government report lays much of the blame for California's workers' compensation crisis at the feet of state officials, concluding they ignored repeated warnings that the system was spiraling out of control.

The report from the independent auditor comes as the Legislature struggles to overhaul a workers' comp system that has lifted employers' costs from $9 billion in 1995 to an estimated $29 billion this year.

In the report, requested by the Legislature several months ago, State Auditor Elaine M. Howle blames state officials for failing to set caps on what insurers pay for medical services or the number of visits injured workers may make to doctors, physical therapists, chiropractors and others.

Richard Gannon, administrative director of the workers' comp division of the Department of Industrial Relations, defended the agency's work and said many reforms being considered originated in his office.

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Government Raises GDP Estimate to 3.1% Rate

The U.S. economy is picking up speed at a faster pace than previously believed, fueled by outlays for the war in Iraq and consumer spending on cars and home improvements, the Commerce Department reported.

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